Can a Rights Issue Be Made at Face Value?

Yes, a rights issue can be priced at face value, though this is uncommon in practice. Most companies prefer to offer shares at a discount to the prevailing market price to encourage participation and ensure full subscription.

Issuing shares at par (face value) is typically done only in special circumstances, such as when:

• The company wants to prevent a hostile takeover by allowing existing shareholders to consolidate their stake quickly.
• The company’s market price is already close to its face value, leaving little room for a discount.

The amount received by the company above the face value (if any) is recorded as share premium in the company’s financial statements.